Banks returning bailouts will face conditions

[thundley4]

WASHINGTON – Banks that want to pay back their federal bailout funds and free themselves from government restrictions on compensation and dividends will have to sever their ties to another financial assistance program.
Financial firms eager to return infusions from the $700 billion Troubled Asset Relief Program will have to demonstrate that they can operate without debt guarantees provided by the Federal Deposit Insurance Corp., a senior government official said Tuesday.
The FDIC program allows financial institutions to borrow money at lower costs. As of May 4, banks had $332.4 billion in debt outstanding under the FDIC's program, which does not impose the same restrictions as TARP
The new requirement will make it harder for some institutions to get out from under government rules attached to the bailouts, another shift in a changing landscape for banks. It also illustrates the government's desire not to have banks abandon the bailout program if they are not financially prepared to do so.
The official spoke on condition of anonymity because the standards have not been made public. The Treasury and the Federal Reserve are expected to issue TARP repayment guidelines on Wednesday, a response to banks that want to get out from under bailout conditions.
The FDIC program, designed to increase liquidity to get banks to make loans, is financed through fees assessed to participating institutions. The program covers debt issued though October of this year. FDIC Chairman Sheila Bair has said the program has collected $7 billion in premiums and does not expect to have any losses. The FDIC does not identify institutions that issue debt under the program, though banks that participate disclose in their financial statements.

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More political blackmail from 0Bama's administration?